According to the international Fisher effect, if Venezuela has a much higher nominal rate than other countries, its inflation rate will likely be ____ than other countries, and its currency will ____.

Answer

lower; strengthen

lower; weaken

higher; weaken

higher; strengthen

1 points

Question 2

The Fisher effect is used to determine the:

Answer

real inflation rate.

real interest rate.

real spot rate.

real forward rate.

1 points

Question 3

According to the IFE, if British interest rates exceed U.S. interest rates:

Answer

the British pound's value will remain constant.

the British pound will depreciate against the dollar.

the British inflation rate will decrease.

the forward rate of the British pound will contain a premium.

today's forward rate of the British pound will equal today's spot rate.

1 points

Question 4

Which of the following theories suggests that the percentage difference between the forward rate and the spot rate depends on the interest rate differential between two countries?

Answer

purchasing power parity (PPP).

triangular arbitrage.

international Fisher effect (IFE).

interest rate parity (IRP).

1 points

Question 5

Assume that the U.S. inflation rate is higher than the New Zealand inflation rate. This will cause U.S. consumers to ____ their imports from New Zealand and New Zealand consumers to ____ their imports from the U.S. According to purchasing power parity (PPP), this will result in a(n) ____ of the New Zealand dollar (NZ$).